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The Power of a Multigenerational Strategy

Frank could make a lot of money as an advisor, but only for stretches at a time. Periods of prosperity in his business sandwiched droughts, sometimes lasting weeks or months. Frank, 42 years old, became an advisor over ten years earlier, after spending seven years as a financial analyst. He had made the career change because he saw financial analysts as an untapped market for the advisor industry. Too many advisors ignored analysts and others in the financial services sector assuming they took care of their planning needs themselves or already had a strong relationship with an advisor. Frank quickly proved his hypothesis by making a six-figure income in his first year. He continued to develop his niche in this market, and ten years later, still attributed over three quarters of his income to young, reasonably affluent 30-something analysts.

Frank enjoyed working in this market, but was troubled by the wild fluctuations in his revenue. During fall and early winter, analysts tended to work 12 to 16 hour days for weeks and months on end and were nearly impossible to reach. Summer wasn’t much better as many disappeared to their cottages. Consequently, Frank tended to make his money during a few crucial weeks. On top of this annual seasonality, Frank had to contend with market cycles. The current down market and the consolidation trend were shrinking his pool of prospects.

To smooth out his revenue line, Frank planned to expand into new markets, and was considering targeting computer programmers, another market characterized by young, reasonably well-off individuals. “Frank,” I said, “I agree with your strategy to move into new markets, but I’m not thrilled with your choice of market because I don’t think it will solve your problem.” Frank asked why. “A successful advisory business depends on the management of five financial levers: product mix, average sales, number of sales, seasonality and cyclicality. Your focus on one market doesn’t allow you to effectively manage these five levers. Because you’re working with people who have the same or similar needs, your range of products and average case size are limited. To test the viability of your new market strategy, you need to judge it against these five levers. And while computer programmers will give you some breadth, you’ll find that, because analysts and programmers have comparable incomes and age ranges, you’ll be addressing similar needs, meaning your average case size and product mix won’t budge much. In the end, because your new market won’t have much affect on your ability to manage the five levers, you won’t be solving your problem.”

Frank asked what markets he should look at. I told Frank that his issue brought to mind another client of mine, Michael Weinberg of Strategies for Wealth Creation and Protection out of New York. “Michael,” I said, “has developed an effective solution for your problem. Similar to yourself Michael made a successful living focusing on institutional traders and analysts. But to grow his business and protect it from the specific risk of a single market focus, Michael has adopted a multi-generational marketing strategy. He took his existing clientele of well-to-do 30-somethings and used them as a springboard to access both an older and younger generation.”

Frank didn’t like the idea of approaching his clients and asking for introductions to their parents. He was afraid his clients would see this move as purely opportunistic. “Frank,” I said, “you’ll find that the opposite is true. In Michael’s experience his clients support the idea of him working with their parents. They care about their parents and are comforted to know Michael is looking after their financial needs. They also appreciate that Michael helps make their parents financially independent — reducing the chance that they’ll look to their kids for support during retirement. Many clients also support Michael’s efforts to create and preserve the estates of their parents — estates they are the beneficiaries of. “Michael also gains the younger generation, generally through his clients’ parents, because as grandparents they want to set up insurance and investment plans for their grandchildren. Inevitably Michael ends up working with the entire family tree, including his clients’ siblings.

Frank was still shaking his head. “I have a lot of expertise working with people in their 30s and early 40s. Working with older people, retirees, or younger kids, putting their education savings plans together… well, that’s not me. I know what I do well.” “Frank, I don’t want you to fall into the trap of what I call ‘playing the finite game’, where you think of your business only in terms of what you can and want to do. But to protect the future of your business, you need to grow, and growing will mean adopting an ‘Infinite Game’ mindset, where you look outside yourself for answers. “Michael is a great example of someone who plays the Infinite Game. Though he knew he could access other generations through his primary clientele, he also knew his limitations when it came to servicing the panoply of needs in these other markets. Which is why he utilizes a team of experts, such as specialists in long-term care, critical illness and retirement income planning. Michael concentrates on building the relationships, and uses a team approach to provide technical expertise.”

Frank was beginning to nod with approval. “Addressing the needs of the different generations has allowed him to manage the five levers of his business. He has increased his average case size. He’s writing considerably more cases. He’s tripled and quadrupled his product mix. And because the generations are so variously affected by different seasonalities and cyclicalities, those effects are minimized.” Frank agreed that he should begin diversifying his business. He spent the next few weeks developing a plan to target his clients’ parents and their children, educating himself on the needs of these markets and acquiring a base of technical and product knowledge, and forging relationships with specialists he could bring in to do casework. As I had expected, Frank met with little resistance in his effort to move up and down generations. Within six months, the benefits were obvious. Frank had acquired a number of affluent elderly clients, increasing his case size and breadth of product. Furthermore, he no longer suffered through dry spells when his analyst prospects were unreachable — instead he focused on these new opportunities in his business. In this way, Frank was able to take command of the five levers that drove his business and steer himself toward growth. For Frank, the answer lay in moving, not horizontally to markets with similar incomes and age ranges, but moving vertically up and down generations. Doing this gave Frank the diversity he needed and opened up his business to significant growth potential.